`Domino effect' led to extra charge at settlement

Mailbag

February 02, 2003

Dear Mr. Azrael:

A few months ago, my mother sold her home in Harford County. Arrangements were made to settle on my mother's home at 11 a.m. on a Monday. She was scheduled to settle on the new home she was purchasing at 1 p.m. that day. The people who bought her home did so without a contingency agreement. But a few weeks later, the buyers of my mother's home sold their house and scheduled that settlement for 9 a.m. on the same settlement day.

My mother hired a moving company to remove her belongings the morning of settlement. That day, my mother was informed that settlement was delayed due to the transaction involving the buyers' old home. The buyers of that house had a problem with their financial report.

As a result, the settlement did not occur that day, and my mother was charged an additional $1,000 for storing her belongings.

I do not believe my mother adequately was advised or that her interests were represented. Neither the real estate company nor the buyers would take responsibility. I don't feel it is right that my mother be burdened with this cost.

My mother acted in good faith and was following the advice of her Realtor to proceed with moving. Shouldn't the information about the financial report have been made available before settlement day?

Please advise as to who is responsible and what recourse we have available to us.

Thank you.

Stephanie L. House

White Hall

Dear Ms. House:

Your mother is totally without fault and has a right to be upset.

Unfortunately, she found herself in a situation that happens more frequently than you might think.

The folks who bought your mother's home could not complete the purchase unless they settled on their home. When their buyers couldn't settle on time, the first buyers couldn't come up with the cash to purchase your mother's home. This is the "domino effect." When one settlement is delayed or canceled, others can fall like dominos.

Before advising your mother to move, her real estate agent should have checked with the buyers' agent to verify that there were no known problems with their settlement.

Indeed, your mother's real estate agent might have asked the right questions.

The buyers' agent may have told your mother's agent that everything looked fine, because she had no reason to believe otherwise. On the other hand, maybe the second buyers' "financial report" problems already had surfaced and would have been disclosed to your mother's agent upon a proper and timely inquiry.

So, whether your mother's real estate agent bears any responsibility for the extra moving expenses depends very much on these facts: What did your mother's agent ask and what was she told? The purchasers of your mother's home also are potentially responsible for her extra expense if they did not settle within the time specified in the agreement of sale.

Most real estate contracts have an outside settlement date. If the contract states that "time is of the essence," then the buyers' failure to settle on or before the specified date could be a breach of contract.

The financial problems of the people who bought the buyers' old home caused the delay in your mother's settlement. From a legal point of view, it is doubtful that your mother has any claim against these buyers. They have no contractual relationship with your mother, and therefore, the legal requirement of "privity" is lacking.

They also do not appear to have intentionally delayed settlement, nor did they intend to cause your mother any damage.

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